Thursday, December 6, 2012

FHA Extends Anti Flipping Waiver Through 2014

Earlier this week I posted a blog that indicated that the GSEs, Fannie Mae and Freddie Mac have loosened their approval criteria by enabling a distressed home seller to participate in a short dale even if they are current on their mortgage. There is additional good news this week as the Federal Housing Administration (FHA) has announced that it will extend its “anti-flipping waiver,” which permits buyers to purchase homes that have already been sold once in the past 90 days. The extension will now carry through to December 31, 2014. The FHA began prohibiting flipping in 2003 in an effort to slow ballooning home values, and the waiver was instituted in 2010 in an attempt to stave off neighborhood blight. The two-year extension has some caveats, however. Properties cannot have a “pattern of previous flips during the 12 months before the transaction” and cannot be marked up more than 20 percent without documentation showing repairs to justify the sale price. These are certainly reasonable caveats and this extension also highlights that the restrictions on short sale home flipping are ludicrous. If the Federal government allows it, how can a lender or servicer allege that it is fraud to re-sell a home in less than 30 days after acquisition of the short sale property? In other words, does the Federal government tacitly allow short sale fraud?? Of course not…this just further illustrates the absurdity of the 30-60-90 day hold periods on many lenders’ approved short sales. This is especially true when you view the reason WHY the FHA extended the waiver. FHA Commissioner Carol Galante justified the extension of the waiver, saying that the decision “is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.” The waiver is not applicable to reverse mortgages insured by the Department of Housing and Urban Development (HUD). The waiver also requires that all transactions be arms-length. Paddy Deighan J.D. Ph.D

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